January WTI crude oil on Tuesday closed down -0.06 (-0.08%), and Jan RBOB gasoline closed up +0.0108 (+0.49%). Crude oil and gasoline prices on Tuesday settled mixed.  Energy prices opened lower after weaker-than-expected U.S. economic reports were negative for energy demand and crude oil prices.  Crude was also under pressure Tuesday after the dollar index recovered from a 2-1/2 month low and moved higher.  However, crude recovered most of its losses, and gasoline prices turned higher, on the outlook for strong U.S. fuel demand this Thanksgiving Day holiday.

Tuesday’s U.S. economic news was weaker than expected and bearish for energy demand and crude prices.  The Oct Chicago Fed national activity index fell -0.47 to a 7-month low of  -0.49, weaker than expectations of zero.  Also, Oct existing home sales fell -4.1% m/m to a 13-year low of 3.79 million, weaker than expectations of 3.90 million. Expectations for increased travel in the U.S. over the Thanksgiving holiday support fuel demand and crude prices.  According to the American Automobile Association (AAA) forecast, 55.4 million Americans are expected to travel 50 miles or more from home over the holiday, the third most in records from 2000. Weakness in the crude crack spread is bearish for crude prices.  The crack spread Tuesday fell to a 1-week low, discouraging refiners from purchasing crude oil and refining it into gasoline and distillates.

Crude prices have support from expectations that OPEC+ might extend existing crude production cuts into early 2024.  OPEC+ will meet November 25-26 in Vienna to discuss extending its crude production cuts. Geopolitical concerns have increased shipping risks in the Middle East due to the Israeli-Hamas war and are supportive of crude prices after an Israeli-owned ship chartered by Japan was seized Sunday in the Red Sea by Iran-backed Houthi rebels.  The rebels said they back Hamas in the conflict and will continue attacks on Israeli territory and ships. An increase in crude in floating storage is bearish for prices.  Monday’s weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week rose +24% w/w to 87.987 million bbl as of Nov 17.

Increased crude consumption in India, the world’s third largest crude consumer, is bullish for oil prices after India’s oil product consumption in October rose +3.7% y/y to 19.3 MMT, the highest five months. An increase in Russian crude exports is bearish for oil prices.  Tanker-tracking data monitored by Bloomberg shows 3.2 million bpd of crude was shipped from Russian ports in the four weeks to Nov 12, near the highest in four months. In a bearish factor for crude oil, the U.S. on Oct 18 said it would ease sanctions for six months on Venezuela’s oil exports in exchange for steps to ensure the country holds fair presidential elections next year.  An easing of sanctions would put additional crude supplies on the global market, with some analysts estimating about 200,000 bpd of additional supplies.

The tightness in the oil market is expected to continue due to the extension of OPEC+ production cuts.  Saudi Arabia recently said it would maintain its unilateral crude production cut of 1.0 million bpd through December.  The move will hold Saudi Arabia’s crude output at about 9 million bpd, the lowest level in three years.  Russia also recently announced that it would maintain its 300,000 bpd cut in crude production through December.  OPEC Oct crude production was little changed, rising +50,000 bpd to 28.08 million bpd. The consensus is for Wednesday’s weekly EIA crude inventories to climb +1.75 million bbl.

Last Wednesday’s EIA report showed that (1) U.S. crude oil inventories as of Nov 10 were -2.4% below the seasonal 5-year average, (2) gasoline inventories were -1.2% below the seasonal 5-year average, and (3) distillate inventories were -13.6% below the 5-year seasonal average.  U.S. crude oil production in the week ended Nov 10 was unchanged w/w at a record high of 13.2 million bpd.

Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Nov 17 rose by +6 rigs to 500 rigs, recovering slightly from the prior week’s 1-3/4 year low of 494 rigs.  The number of U.S. oil rigs has fallen this year after moving sharply higher during 2021-22 from the 18-year pandemic low of 172 rigs posted in Aug 2020 to a 3-1/2 year high of 627 rigs in December 2022.